Recently, the stock price of Hezhima Intelligent, known as China's first "smart driving chip stock," has experienced extreme fluctuations, reminiscent of a roller coaster ride in the financial markets.

On February 11, shares of Hezhima Intelligent closed at HKD 22.35, reflecting a drop of 4.69%.

Just prior to this downturn, the company had seen a significant surgeOn February 6, its stock price jumped by approximately 12%, and on February 7, it experienced a late-session surge of over 55%, eventually closing with a total increase of 37.59% over the two days, amassing a cumulative rise exceeding 50%.

However, a clarification announcement released on the morning of February 10 triggered a sell-off, with the stock plummeting by over 50% at one point during the trading sessionThe stock eventually closed at HKD 23.45, reflecting a staggering 39.56% decline.

Market analysts suggested that the stock price volatility surrounding Hezhima Intelligent was closely linked to events related to BYD, a major player in the electric vehicle sector.

The Roller Coaster Ride of Stock Prices

On February 6, BYD announced an upcoming "Smart Driving Equality" event scheduled for four days later

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The company stated that it would hold a strategic release conference focusing on its "Eye of God" high-level smart driving system on the evening of February 10.

The news prompted a rally in smart driving-related stocks on the same day, with Hezhima Intelligent soaring over 37%, Horizon Robotics gaining 10.42%, and Simu Technology climbing 10%.

The following day, additional news circulated that BYD had adopted Hezhima Intelligent's automotive-grade autonomous driving computing chips for its Tengshi brand vehiclesIn response, Hezhima Intelligent confirmed that its chips had been utilized by BYD, with production already in progress, although specific details were withheld.

This barrage of positive news sparked a rapid acceleration in the stock price of Hezhima Intelligent within a short time frame.

At that time, industry insiders analyzed that BYD is currently the largest new energy vehicle manufacturer globallyWith its strides towards increased intelligence and subsequent success in achieving "smart driving equity," its sales could see another boostThe application of Hezhima Intelligent's chips in BYD's intelligent systems would serve as a significant recognition of its product strength and market position.

Yet, this bullish trend was abruptly halted with an announcement that turned the tide for Hezhima Intelligent's soaring stock price.

On the morning of February 10, Hezhima Intelligent released a clarification, noting that its board had observed unusual fluctuations in share price and trading volume on February 7.

The board clarified that Hezhima Intelligent maintained long-term cooperation with original equipment manufacturers (OEMs), including but not limited to BYD, as part of its routine business operations

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The announcement underscored that the relationship with major automakers like BYD was standard business conduct.

Subsequently, as further details about the BYD conference emerged, the market started to recognize that Hezhima Intelligent might merely be a regular supplier for BYD, rather than the chosen chip supplier for core model applicationsThis indicates that the advanced smart driving system from BYD may have little correlation with Hezhima Intelligent's offerings.

As the hype dissipated, the market returned to a more rational state.

By the end of trading on February 10, Hezhima Intelligent’s stock closed down at HKD 23.45, a 39.56% decrease, bringing it back to levels seen prior to February 6.

Nearly 10 Billion Lost Over Three Years

As the global automotive industry pivots towards electrification and automation, the demand for intelligent solutions in new energy vehicles has been surgingThis rapid growth grants substantial market opportunities to companies involved in related supply chains.

Hezhima Intelligent, as a firm focusing on the research and development of autonomous driving and AI chips, took advantage of this intelligent transition by listing on the Hong Kong Stock Exchange in August of last year, becoming known as China's "first smart driving chip stock."

In the first half of 2024, the company reported revenue of 180 million yuan, achieving net profits of 1.105 billion yuan, marking a reversal from its previous losses

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Notably, revenues from autonomous driving products and solutions amounted to 167 million yuan, reflecting an 85.5% year-on-year increase, primarily driven by an enriched product mix and a broader engagement with larger-scale clientsIn contrast, smart imaging solutions generated approximately 12.9 million yuan, showing a year-on-year decline of 21.1%, largely attributed to changes in client procurement schedules.

Crucially, this turnaround in Hezhima Intelligent's financials does not have a direct correlation with the development of its business, but rather stems from the fair value changes of financial instruments issued to investors.

The financial report indicated that the company recorded a fair value loss of approximately 3 billion yuan from financial instruments issued to investors during the first half of 2023. However, this figure flipped to a gain of 1.932 billion yuan in the first half of 2024, attributable to the fair value variances of equity held by investors with preferential rights, thus enabling the company to achieve profitability.

That said, Hezhima Intelligent has been in a deficit position for the previous three yearsFrom 2021 to 2023, the company reported losses of 2.357 billion yuan, 2.754 billion yuan, and 4.855 billion yuan, accumulating a near-total loss of nearly 10 billion yuanWhether it can sustain profitability during the 2024 fiscal year remains to be seen.

Moreover, it is essential to acknowledge that as competition intensifies, Hezhima Intelligent faces fierce rivalry both domestically and internationally.

In the Chinese market, competitors such as Huawei, Baidu, and Horizon are actively making moves in the autonomous driving chip sector, posing substantial technological prowess and market share

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